ERISA Plans. Plan administrators who fail to timely file an annual report on Form 5500 are subject to penalties under both ERISA and the Code. In 1995, the Department of Labor (DOL) adopted the Delinquent Filer Voluntary Compliance program (DFVC), which permits late filers to file delinquent Forms 5500 (including all required schedules) and pay a reduced penalty. The IRS announced, in Notice 2002-23, that it will not impose penalties under the Code on plan administrators who are eligible for and follow the DFVC procedures. Since 2002, the Department of Labor revised its procedures to require electronic filing of all Form 5500s beginning with the 2009 plan year. Last year the DOL revised the DFVC program to require electronic filing for delinquent filings. In addition, beginning with the 2009 plan year Schedule SSA was replaced by Form 8955-SSA, which is a standalone form that is filed only with the IRS. In its most recent guidance on DFVC, the DOL announced that delinquent filers may not submit a Schedule SSA or a Form 8955-SSA under the DFVC program, even for 2008 and prior years.
In light of these changes in procedure, the IRS recently issued Notice 2014-35 to provide that a plan administrator who has not timely filed Form 5500 and all schedules and Form 8955-SSA for a year or years will not be subject to penalties under the Code if the plan administrator:
- Is eligible for and satisfies all of the requirements of the DFVC program for the applicable year or years, and
- Files separately with IRS a Form 8955-SSA for the year or years to which the DFVC filing relates. The filing with the IRS must be on paper.
The filing with the IRS must be completed by the later of the 30th calendar day after the plan administrator completes the DFVC filing or December 1, 2014. For example, if a plan administrator previously used the DFVC program to correct a delinquent filing for 2008, but did not file Form 8955-SSA, the plan administrator must file Form 8955-SSA with the IRS on paper no later than December 1, 2014 to be eligible for waiver of the Code’s late filing penalties for the 2008 plan year.
Non-ERISA Plans. The procedure described in Notice 2014-35 and its predecessor does not apply to non-ERISA plans. In Notice 2014-32, the IRS announced a one-year pilot program to provide penalty relief for non-ERISA plans. The program opened on June 2 2014 and will end on June 2, 2015.
The pilot program is available to (a) one-participant plans, defined as plans that cover only the owner of a business (and the spouse), one or more partners (and their spouses), and does not cover anyone else (such as common law employees) and (b) foreign plans. There is no fee for submitting delinquent filings under the pilot program. The submission is to be filed on paper at the addresses specified in Notice 2014-35 and include the following:
- The Form 5500 for the applicable year and all required schedules, reports, and attachments. For returns for 2008 and earlier years, the filer should submit the Form 5500 for that year. For returns for 2009 and later years, the filer should submit the Form 5500-EZ for that year. Prior year forms are available online at www.irs.gov or by calling 1-800-TAX-Form.
- Each delinquent return must include the following in red letters at the top of the first page above the title: “Delinquent return submitted under Rev. Proc. 2014-32, Eligible for Penalty Relief.”
- The filer must attach the Transmittal Schedule (Attachment A to Notice 2014-32) to the front of each delinquent return. For example, if there are 3 delinquent returns, the filer must complete 3 Transmittal Schedules, one for each return.
The Notice states that the failure to follow the procedures, for example, not marking the first page in red or failing to attach a Transmittal Schedule to each return) may cause the IRS to treat the submission as ineligible for relief and to assess all of the penalties.